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you have to wait to capture your market and experience what your true costs are.

So this is a suggestion that the Post Office with new products be given this flexibility. It has been a long time coming and it makes a lot of sense.

And there are several other expedited procedures whereby small changes in classes and rates would be allowed on a quick turnaround without having to have full-blown rate cases.

All in all, we think the suggestions, the concepts make a lot of sense. We want to see the fine print to make sure that it will actually work.

We appreciate this opportunity and I am prepared to answer any questions the committee may have. Thank you.

[The prepared statement of Timothy J. May follows:)

STATEMENT OF TIMOTHY J. MAY

GENERAL COUNSEL OF THE
PARCEL SHIPPERS ASSOCIATION

BEFORE
THE COMMITTEE ON POST OFFICE AND CIVIL SERVICE

June 9, 1992

My name is Timothy J. May; I am General Counsel of The

Parcel Shippers Association, a group of approximately 200

businesses which utilize the United States Postal Service and

other carriers to ship parcels in interstate commerce. Our members are heavily reliant upon the Postal Service as the principal means for soliciting their customers; and these customers in turn use the Postal Service to place orders for merchandise, and -o pay their bills for that merchandise.

We are pleas ! to have this opportunity to comment generally on the current s: :us of the United States Postal Service, and

particularly on t..e efficacy of the recommendations of the Joint

Postal Service Governors/Postal Rate Commissioners Task Force on

the Ratemaking Process.

To put it succinctly, the Postal Service

picture is bleak. Major mail users are reeling from two successive rate increases that were far in excess of the rate of

inflation over the last six years; postal volume has declined;

postal revenue is well below plan; and postal costs are above plan. Productivity has declined and, despite the expenditure of billions of dollars for automation, automation is not producing the promised cost savings. The Postal Service has mismanaged the allocation of its people resources to manage the significant changes that are dictated by automation.

How much of this can be blamed on the ratemaking process?

Very little.

The Postal Rate Commission cannot be blamed for the

inability of the Postal Service to control its costs and to

realize the benefits from billions of dollars spent on

automation.

However, the Postal Rate Commission does bear direct

responsibility for some of the volume and revenue losses being experienced by the Postal Service. Large segments of the third

class mailing community were visited with rate increases exceeding 60% in a four-year period ci time. It requires little

knowledge of economics to understand what those kinds of postal

rates will do to third-class volumes and revenues.

Both the Administration and the Congress bear a considerable

share of the blame for the Postal Service's current condition.

The OBRA of 1991 imposed a $4.7 billion burden on the Postal

Service to be paid out over five years.

And it hasn't ended

there. In the two succeeding years, the Administration has asked
for even more money to be transferred from postal rate payers to
the Treasury to help balance the federal budget, not for any
current or future postal costs but, in large part, for
obligations incurred by the federal government before the Postal

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Service even came into being under the Postal Reorganization Act.

It is possible that the Task Force recommendations can

streamline the ratemaking process; make rates more reliably based on real costs the Postal Service is experiencing, rather that theoretical guesses about what postal costs are going to be. Are these recommendations, however, going to change the ratemaking

philosophy of the Commissioners and staff, a philosophy that has led the Commission to such exorbitant and destructive third-class

rates? That is unlikely. While the catemaking process is unwieldy, expensive, and burdensome for all parties involved, it cannot be successfully scapegoated as the reason for the postal Service's troubles or the Commission's strange pricing methodology. The process can and should be improved and these recommendations on ratemaking can help. But it was never the process that was at fault for the postal Service's ills.

The main focus of the concern of our Association is parcel post. However, all of our members are dependent upon reasonably priced, third-class mail to solicit their sales; it is their lifeline. Consequently, no amount of good news about parcel post -- and there is plenty of good news can redeem the grave

condition of third-class mail for them.

When we appeared before your committee last year, we applauded the Postal Service for making innovative proposals for parcel post, and particularly applauded the Postal Rate Commission for approving those proposals and curing the major costing defects in those proposals. Those parcel post rates, now

implemented, have paid off for our members and for the Postal

Service. It is one of the few bright spots for the Postal Service in terms of volumes and revenues. Both are up for the first time in two decades. This is a direct result of four

things:

1.

2.

high monopolistic rates by United Parcel Service;
innovative rate designs recommended by the Postal Rate
Commission, particularly the DBMC rates;
significant cooperation by Postal Service officials
with parcel shippers to make the new DBMC rates work;

3.

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These developments hold out real promise for the postal Service to regain some small share of the parcel market and to once again become a viable competitive factor in that market.

We will now have a new Postmaster General, Marvin Runyon,

who brings with him a reputation for dealing with and solving operational and management challenges. We believe the postal community is fortunate that a man of Mr. Runyon's talents would

be willing to make the sacrifice and to put at risk a well earned reputation by taking on what may be the most difficult job in the

country.

Our Association will work with him in every way it can

to turn things around.

At the same time, we do have to express some dismay that the

postal system appears not to be able to produce from within its own ranks the leadership the Postal Service must have. The last four Postmasters General have had to be recruited from outside.

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